'Fiscal cliff' talks faltering as deadline approaches

ELEVENTH-HOUR talks between US President Barack Obama and the Republican dominated Congress in a bid to avert the so-called 'fiscal cliff' are faltering, The Financial Times reports. If the two sides cannot reach a deal today then a round of automatic tax rises and spending cuts will take place. This will create a highly unstable financial landscape and is likely to cause huge knock-on effects in global financial markets.

Mitch McConnell, the Republican Senate minority leader, said "no one issue" was separating the two sides, adding that he had called Joe Biden, the vice-president and a former senator, to help break the deadlock.

The good news is that the two sides are closer to agreement on one key issue: repeal of former President George W Bush's tax cuts for high earners. Obama had originally proposed lifting tax rates for households earning more than $250,000 but he now appears to have softened his line and is proposing a ceiling of between $400,000 and $500,000.

Also under negotiation are continued benefits for 2m unemployed Americans and tax rises on dividends, capital gains and higher estate taxes. If a deal cannot be reached then US government agencies will be forced to lay off workers. The Pentagon is already preparing notices to be distributed to 800,000 workers.
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